HB 152: "An Act establishing an education tax on the income of individuals, partners, shareholders in S corporations, trusts, and estates; repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act; and providing for an effective date."
00 HOUSE BILL NO. 152 01 "An Act establishing an education tax on the income of individuals, partners, 02 shareholders in S corporations, trusts, and estates; repealing tax credits applied against 03 the tax on individuals under the Alaska Net Income Tax Act; and providing for an 04 effective date." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 43.05.045(a) is amended to read: 07 (a) Except as provided in AS 43.22.075(h), unless [UNLESS] an exemption 08 is granted under (b) of this section, a taxpayer required to submit a return or report for 09 a tax levied under this title or for any other tax administered by the department shall 10 submit the return or report electronically in a format prescribed by the department. 11 Failure to comply with this section may result in a civil penalty under 12 AS 43.05.220(f). If a law under this title requires a report or return or a portion of a 13 report or return to be in writing, an electronically filed report or return satisfies this 14 section. A taxpayer shall submit attachments to a report or return required under this
01 title electronically. 02 * Sec. 2. AS 43 is amended by adding a new chapter to read: 03 Chapter 22. Education Tax. 04 Sec. 43.22.010. Education tax on individuals. (a) Each calendar year or 05 fraction of a calendar year, a tax is imposed on the income of a 06 (1) resident individual, trust, or estate; 07 (2) nonresident individual, trust, or estate that is derived from or 08 connected with a source in the state. 09 (b) The tax under this section is four percent of taxable income over $150,000 10 for an individual who files a separate federal income tax return or four percent of 11 taxable income over $300,000 for individuals who file a joint federal income tax 12 return. 13 (c) Two individuals who file a joint federal income tax return when both or 14 one of whom is not a resident may elect to determine the tax imposed by this chapter 15 either 16 (1) individually; or 17 (2) jointly as if both individuals were residents; the income of the 18 individuals filing jointly under this paragraph is not subject to the calculation under 19 AS 43.22.015. 20 (d) In addition to the tax under (a) - (c) of this section, each individual who 21 has wages, net earnings from self-employment, or combined wages and net earnings 22 from self-employment in the state shall pay an annual tax of $150. In this subsection, 23 "net earnings from self-employment" has the meaning given in 26 U.S.C. 1402. 24 Sec. 43.22.015. Calculation of tax on a nonresident individual. (a) Except as 25 otherwise provided in (b) of this section, the tax on a nonresident individual is the 26 product of 27 (1) the tax determined under AS 43.22.010(b) on the nonresident 28 individual's taxable income computed as if the nonresident individual were a resident 29 individual but taking a deduction under AS 43.22.030(b)(2); and 30 (2) a fraction, the 31 (A) numerator of which is the nonresident individual's income
01 taxable under AS 43.22.045; and 02 (B) denominator of which is the nonresident individual's 03 taxable income computed as if the nonresident individual were a resident 04 individual. 05 (b) If a nonresident individual's taxable income computed under (a)(2)(B) of 06 this section is less than the nonresident individual's income taxable under (a)(2)(A) of 07 this section, the tax imposed by this chapter is on the nonresident individual's taxable 08 income as computed under AS 43.22.045. 09 Sec. 43.22.020. Tax on trusts and estates. (a) A tax is imposed for each 10 taxable year or portion of a taxable year on the taxable income of a resident or 11 nonresident trust or estate. The tax under this section for a trust or estate is $150 plus 12 four percent of taxable income over $150,000. 13 (b) In this section, the taxable income of a nonresident trust or estate is the 14 income of the trust or estate that is derived from or connected with a source in the 15 state. 16 (c) A trust is not subject to tax under this chapter if 17 (1) all of the trustees of the trust are nonresidents; 18 (2) the entire corpus of the trust, including real, tangible, and 19 intangible property, is located outside the state; and 20 (3) no income or gains of the trust are derived from or connected with 21 a source in the state. 22 (d) For purposes of (c)(1) of this section, a trustee that is a nonresident 23 banking corporation at the time the banking corporation becomes a trustee is a 24 nonresident trustee even if the banking corporation later becomes a resident trustee 25 because it is acquired by or becomes an office or branch of a resident trustee. 26 (e) A trust that is exempt from federal income tax because of its purpose or 27 activities is not subject to tax under this chapter. 28 (f) A special needs trust or other trust established to provide solely for the 29 housing, living expenses, or medical care of a disabled beneficiary is not subject to tax 30 under this chapter. In this subsection, 31 (1) "disabled beneficiary" means an individual who has
01 (A) a physical or mental impairment that substantially limits 02 one or more major life activities; or 03 (B) a condition that may require the use of a prosthesis, special 04 equipment for mobility, or a service animal; 05 (2) "special needs trust" has the meaning given in AS 13.36.215(b). 06 Sec. 43.22.025. Credit for taxes imposed by other jurisdictions. (a) A 07 resident individual, trust, or estate or part-year resident individual, trust, or estate is 08 allowed a credit against the tax due under this chapter for an income tax that was 09 imposed on the resident or part-year resident for the taxable year by another state or 10 the political subdivision of another state on income derived from or connected with 11 that state or political subdivision. 12 (b) A credit allowed under (a) of this section 13 (1) for a resident individual, trust, or estate may not exceed the 14 individual's, trust's, or estate's tax due under this chapter before credits are applied, 15 multiplied by a fraction, the numerator of which is the portion of the individual's, 16 trust's, or estate's taxable income that is derived from or connected with a source in 17 another state or the political subdivision of another state and the denominator of which 18 is the resident individual's, trust's, or estate's taxable income; 19 (2) for a part-year resident individual, trust, or estate may not exceed 20 the individual's, trust's, or estate's tax due for the period of state residency before 21 credits are applied, multiplied by a fraction, the numerator of which is the individual's, 22 trust's, or estate's taxable income derived from or connected with a source in another 23 state or the political subdivision of another state during the period of state residency 24 and the denominator of which is the part-year resident individual's, trust's, or estate's 25 taxable income during the period of state residency; 26 (3) may not reduce the tax due under this chapter to less than the tax 27 that would have been due if the income derived from or connected with a source in 28 another state or the political subdivision of another state and subject to taxation by the 29 other state or political subdivision had been excluded from the resident or part-year 30 resident individual's, trust's, or estate's taxable income during the calculation of tax 31 under this chapter before the application of credits.
01 (c) If the tax administration of another state or a political subdivision of 02 another state determines that a taxpayer has overpaid tax, affecting the computation of 03 the credit allowed under this section for any taxable year, the taxpayer shall file an 04 amended return with the department not later than 90 days after the final determination 05 by the state or political subdivision that the tax was overpaid. The department may 06 assess a taxpayer additional tax, proportional to the amount overpaid in the other state 07 or political subdivision. 08 (d) A taxpayer is not allowed a credit under this section for taxes paid to 09 another jurisdiction if the taxpayer claims a credit against the income tax imposed by 10 the other jurisdiction for the tax payable under this chapter. 11 (e) Income tax imposed on a partner or the shareholder of an S corporation on 12 the income of the partnership or S corporation, including tax paid by the partnership or 13 S corporation to satisfy the tax liability of the partner or shareholder, may be included 14 in the calculation of a credit under this section. Tax imposed on the partnership or S 15 corporation that is the direct liability of the partnership or S corporation and not that of 16 the partner or shareholder may not be included in the calculation of a credit under this 17 section. 18 Sec. 43.22.030. Taxable income; general rule. (a) In this chapter, taxable 19 income is the taxpayer's federal adjusted gross income for the taxable year 20 (1) plus, if not already included in federal adjusted gross income, 21 (A) interest on obligations of another state, a political 22 subdivision of another state, the public instrumentality of another state, or the 23 local authority of another state; 24 (B) a loss on the sale or exchange of an obligation issued by or 25 on behalf of 26 (i) the state; 27 (ii) a municipality of the state; or 28 (iii) a public instrumentality, public authority, or public 29 corporation created under state law; 30 (C) a loss from the sale or exchange of shares in a unit 31 investment trust if the loss is attributable to an obligation issued by or on
01 behalf of 02 (i) the state; 03 (ii) a municipality of the state; or 04 (iii) a public instrumentality, public authority, or public 05 corporation created under state law; 06 (D) interest or dividends on obligations or securities issued by 07 the United States, or an authority, commission, or instrumentality of the United 08 States, that the Internal Revenue Code exempts from federal income tax; 09 (E) taxes under this chapter; 10 (F) a gain realized but not recognized under 26 U.S.C. 1031 11 (Internal Revenue Code); 12 (G) a deduction allowed in the determination of federal 13 adjusted gross income that is directly or indirectly related to income that is not 14 taxable under this chapter; and 15 (H) income of an incomplete gift nongrantor trust to which a 16 taxpayer transferred property, less deductions of the trust, if 17 (i) the income and deductions of the trust would be 18 taken into account in computing the taxpayer's federal taxable income 19 if the trust in its entirety was treated as a grantor trust under the Internal 20 Revenue Code; 21 (ii) the trust is a resident trust; 22 (iii) the trust does not qualify as a grantor trust under 26 23 U.S.C. 671 - 679 (Internal Revenue Code); and 24 (iv) the grantor's transfer of assets to the trust is treated 25 as an incomplete gift under 26 U.S.C. 2511 (Internal Revenue Code); 26 (2) minus, if included in federal adjusted gross income, 27 (A) interest income or a dividend from an obligation that is 28 exempt from taxation by a state under federal law; 29 (B) a refund or credit for the overpayment of an income tax; 30 (C) an ordinary and necessary expense, including an interest 31 expense, paid or incurred during the taxable year, that is directly or indirectly
01 related to income exempt under the Internal Revenue Code but taxable by the 02 state; 03 (D) a gain recognized under 26 U.S.C. 1031 (Internal Revenue 04 Code) that was included in federal adjusted gross income under (1) of this 05 subsection; 06 (E) income exempt under 4 U.S.C. 114; 07 (F) compensation prohibited from state taxation by 50 U.S.C. 08 3901 - 4043 (Servicemembers Civil Relief Act); 09 (G) a gain from the sale or exchange of an obligation issued by 10 or on behalf of 11 (i) the state; 12 (ii) a municipality of the state; or 13 (iii) a public instrumentality, public authority, or public 14 corporation created under state law; 15 (H) a permanent fund dividend received by the taxpayer or the 16 taxpayer's dependent under AS 43.23. 17 (b) In addition to the adjustments made to taxable income under (a) of this 18 section, a taxpayer may receive a standard deduction. Subject to adjustment under (d) 19 of this section, the deduction under this subsection for 20 (1) an individual resident taxpayer is $12,950; 21 (2) an individual resident who files federal income taxes as a head of 22 household is $19,400; 23 (3) two resident taxpayers filing jointly is $25,900; 24 (4) an individual nonresident is the product of $12,950 and a fraction, 25 the numerator of which is the nonresident individual's income taxable under 26 AS 43.22.045, computed without the deduction under this subsection, and the 27 denominator of which is the nonresident individual's taxable income computed as if 28 the nonresident individual were a resident individual and without the deduction under 29 this subsection; the deduction under this paragraph may not exceed $12,950 for each 30 exemption claimed; 31 (5) an individual nonresident who files federal income taxes as a head
01 of household is the product of $19,400 and a fraction, the numerator of which is the 02 nonresident individual's income taxable under AS 43.22.045, computed without the 03 deduction under this subsection, and the denominator of which is the nonresident 04 individual's taxable income computed as if the nonresident individual were a resident 05 individual and without the deduction under this subsection; the deduction under this 06 paragraph may not exceed $19,400 for each exemption claimed; 07 (6) two nonresident individuals filing jointly is the product of $25,900 08 and a fraction, the numerator of which is the nonresident individuals' income taxable 09 under AS 43.22.045, computed without the deduction under this subsection, and the 10 denominator of which is the nonresident individuals' taxable income computed as if 11 the nonresident individuals were resident individuals and without the deduction under 12 this subsection; the deduction under this paragraph may not exceed $25,900 for each 13 exemption claimed. 14 (c) The deduction under (b) of this section may not 15 (1) be claimed by a trust; 16 (2) reduce a taxpayer's tax liability under this chapter to below zero. 17 (d) Each year, the department shall adjust the amounts of the standard 18 deduction under (b) of this section for inflation. The adjustment for inflation is equal 19 to the adjustment for inflation calculated for the standard deduction against the federal 20 income tax as set out in 26 U.S.C. 63. 21 (e) When calculating taxable income, a taxpayer 22 (1) may not carry back a net operating loss under 26 U.S.C. 23 172(b)(1)(A)(i) (Internal Revenue Code); 24 (2) may carry over a net operating loss under 26 U.S.C. 25 172(b)(1)(A)(ii) (Internal Revenue Code), except that a loss may not be carried over 26 for more than five years; for a taxpayer subject to AS 43.19 (Multistate Tax Compact), 27 the amount of a net operating loss allowed to be carried over is limited to the amount 28 apportioned to the state in the taxable year in which the loss was generated under 29 AS 43.19 (Multistate Tax Compact); 30 (3) shall include the modifications required by AS 43.20.144(b)(2), 31 concerning intangible drilling and development costs, AS 43.20.144(b)(3), concerning
01 percentage depletion, and AS 43.20.144(b)(4), concerning depreciation. 02 Sec. 43.22.035. Taxable income from partnerships and S corporations. (a) 03 A partner or shareholder shall make an adjustment described in AS 43.22.030 to 04 income or a gain, loss, or deduction from a partnership or S corporation in proportion 05 to a partner's distributive share of a partnership or a shareholder's pro rata share of an 06 S corporation. If a partner's distributive share or a shareholder's pro rata share of an 07 adjustment is not required to be accounted for separately for federal income tax 08 purposes, the partner's or shareholder's share of the adjustment must be determined in 09 proportion to the partner's or shareholder's share of partnership or S corporation 10 income or losses for federal income tax purposes. 11 (b) In determining taxable income, a partner or shareholder shall treat income 12 or a gain, loss, or deduction from a partnership or S corporation as if it has the same 13 character as it does for federal income tax purposes. If income or a gain, loss, or 14 deduction from a partnership or S corporation is not accounted for separately for 15 federal income tax purposes, a partner or shareholder shall treat the income, gain, loss, 16 or deduction as if it were realized directly from the source from which it was realized 17 by the partnership or S corporation or incurred in the same manner it was incurred by 18 the partnership or S corporation. 19 (c) If the principal purpose of a special allocation of partnership income or a 20 gain, loss, or deduction is the evasion of tax under this chapter, the partner's 21 distributive share is determined as if the partnership agreement did not have the 22 special allocation. In this subsection, "special allocation" means an allocation of the 23 distributive share of partnership income or a gain, loss, or deduction made under the 24 partnership agreement to a partner in a proportion different than the partner's 25 partnership interest. 26 Sec. 43.22.040. Taxable income of an estate, trust, or beneficiary. (a) The 27 taxable income of an estate or trust is determined as if the estate or trust were an 28 individual and is subject to adjustments under AS 43.22.030 and reduction under 26 29 U.S.C. 661 (Internal Revenue Code). The department may establish in regulation the 30 method for determining the taxable income of an estate or trust, including the manner 31 in which the adjustments under AS 43.22.030 will be allocated between the estate's or
01 trust's taxable share and a beneficiary's distributive share. Unless otherwise provided 02 by the department in regulation, an allocation must be made in proportion to the 03 estate's or trust's taxable share or the beneficiary's distributive share of the trust or 04 estate for federal income tax purposes. 05 (b) If the principal purpose of a provision of an instrument directing the 06 distribution of income or a gain, loss, or deduction of an estate or trust is the evasion 07 of tax under this chapter, the taxable income of the estate, trust, or beneficiary will be 08 determined as if the instrument did not contain the provision. 09 Sec. 43.22.045. Nonresident individuals; income derived from or 10 connected with a source in the state. (a) The taxable income of a nonresident 11 individual is the nonresident individual's income derived from or connected with a 12 source in the state, as adjusted under AS 43.22.030. The taxable income of a 13 nonresident individual includes 14 (1) a partner's distributive share of income or a gain, loss, or deduction 15 of the partnership, as determined under AS 43.22.050; 16 (2) a shareholder's pro rata share of an S corporation's income or loss, 17 increased by the reductions for taxes described in 26 U.S.C. 1366(f)(2) and (3) 18 (Internal Revenue Code), as determined under AS 43.22.050; 19 (3) income or loss of a business conducted by a nonresident individual, 20 nonresident estate, or nonresident trust, other than income or loss from a partnership or 21 S corporation, as determined under AS 43.22.050; 22 (4) estate or trust income or a gain, loss, or deduction of the estate or 23 trust, as determined under AS 43.22.055; 24 (5) income or a gain, loss, or deduction from the sale or assignment of 25 a beneficial interest, or other disposition of an interest in tangible personal property in 26 the state, or rental income or loss from the use of tangible personal property in the 27 state; if the income, gain, loss, or deduction is from tangible personal property used or 28 employed both in and outside the state, the amount included in taxable income is 29 determined by multiplying the income, gain, loss, or deduction by a fraction, the 30 numerator of which is the number of days during which the property was used or 31 employed to earn, accrue, or incur the income, gain, loss, or deduction in the state and
01 the denominator of which is the total number of days during the taxable year that the 02 property was used or employed to earn, accrue, or incur the income, gain, loss, or 03 deduction; 04 (6) income or a gain, loss, or deduction from the sale, assignment, or 05 other disposition of an interest in real property in the state, or rental income or loss 06 from the use of real property in the state, including the percentage of ordinary and 07 capital gains received from a real estate investment trust, as defined in 26 U.S.C. 856 08 (Internal Revenue Code), that is attributable to rents from or sale or other disposition 09 of real property located in the state; in this paragraph, income or a gain, loss, or 10 deduction from the sale, assignment of a beneficial interest, or other disposition of real 11 property in the state includes income or a gain, loss, or deduction derived from the sale 12 or assignment of a beneficial interest in a partnership, S corporation, nonpublicly 13 traded C corporation with 100 or fewer shareholders, estate, or trust, if the entity owns 14 real property in the state that has a fair market value equal to or exceeding 50 percent 15 of all assets of the entity on the date of sale, assignment, or other disposition of the 16 taxpayer's interest in the entity; for purposes of this paragraph, 17 (A) only assets owned for at least two years before the date of 18 the sale, assignment, or other disposition of an interest in the entity shall be 19 used to determine the fair market value of all of the assets of the entity on the 20 date of sale, assignment, or other disposition; and 21 (B) the amount of income or a gain, loss, or deduction derived 22 from or connected with a source in the state from the sale, assignment, or other 23 disposition of an interest in an entity that is subject to the provisions of this 24 paragraph is the amount recognized for federal income tax purposes related to 25 the sale, assignment, or disposition, multiplied by a fraction, the numerator of 26 which is the fair market value of the real property located in the state on the 27 date of sale, assignment, or disposition and the denominator of which is the fair 28 market value of all of the assets of the entity on the date of the sale, 29 assignment, or disposition; 30 (7) compensation, salary, or wages for personal services rendered or 31 performed in the state that are derived from a business, trade, profession, occupation,
01 or employment carried on in the state; for purposes of this paragraph, personal 02 services 03 (A) except as otherwise provided in (B) of this paragraph, 04 include services performed 05 (i) in connection with presenting or receiving 06 employment-related training or education in the state; 07 (ii) in connection with a site inspection, review, 08 analysis, or management or any other supervision of a facility located 09 in the state; 10 (iii) in connection with research and development at a 11 facility located in the state or in connection with the installation of new 12 or upgraded equipment or systems at that facility; 13 (iv) as part of a project team working on the attraction 14 or implementation of new investment in a facility located or planned to 15 be located in the state; 16 (v) in connection with fishing, farming, or agriculture in 17 the state; or 18 (vi) for the federal government; 19 (B) do not include services that are casual, isolated, 20 inconsequential, or ancillary to out-of-state services; 21 (8) income derived from a business, trade, profession, occupation, or 22 employment carried on in the state, including income 23 (A) received under a covenant not to compete, a severance 24 agreement, a termination agreement, or unemployment compensation 25 insurance attributable to a business, trade, profession, occupation, or 26 employment previously carried on in the state, regardless of when received; 27 (B) derived from a business, trade, profession, occupation, or 28 employment carried on in the state by an individual who maintains or operates 29 an office, shop, store, warehouse, boat, plane, factory, agency, or other place 30 where the individual's affairs are systematically and regularly carried on, 31 regardless of other transactions carried on outside the state; this subparagraph
01 does not include income from an activity of an individual whose presence in 02 the state is casual, isolated, inconsequential, or ancillary to out-of-state 03 activities, except that, if a business, trade, profession, occupation, or 04 employment is carried on partly in and partly outside the state, other than for 05 the rendering of purely personal services by the individual, the taxable income 06 derived from or connected with a source in the state is determined under 07 AS 43.19 (Multistate Tax Compact) and AS 43.22.030; 08 (9) income from the management or investment function or activities 09 conducted in the state from intangible property; 10 (10) dividends, interest, payments received under an annuity, gains, or 11 other intangible income received from, or attributable to, intangible personal property, 12 including stock, bonds, notes, bank deposits, or annuities, if the intangible personal 13 property is employed in a business, trade, profession, occupation, or employment 14 carried on in the state; 15 (11) a gain derived from a statutory stock option, restricted stock, 16 nonstatutory stock option, or stock appreciation right by a nonresident individual who, 17 at the time the gain is received, performs services in the state for or is employed in the 18 state by the corporation granting the option, stock, or right, as determined in 19 regulations adopted by the department; 20 (12) income from nonqualified deferred compensation plans 21 attributable to services performed in the state, including compensation included in 22 federal gross income under 26 U.S.C. 457A (Internal Revenue Code); 23 (13) proceeds from a gambling activity conducted in the state or lottery 24 tickets purchased in the state, including payments received from a third party for the 25 transfer of the rights to future proceeds related to a gambling activity in the state or 26 lottery tickets purchased in the state; 27 (14) for an S corporation that terminates its taxable status in the state 28 during the tax year, income or a gain recognized on the receipt of payments from an 29 installment sale contract entered into at the time the S corporation was subject to tax in 30 the state, allocated in a manner consistent with the applicable methods and rules under 31 this chapter;
01 (15) royalties or other compensation received for the use of a patent, 02 copyright, secret process or formula, good will, mark, trade brand, franchise, or other 03 property having a taxable or business situs in the state; 04 (16) royalties or other compensation received for the use of a patent if 05 the patent is employed in production, fabrication, manufacturing, or other process in 06 the state; 07 (17) income or a gain from the disposition of an asset if the 08 acquisition, management, or disposition of the asset constitutes an integral part of the 09 nonresident individual's regular trade or business operation; 10 (18) income from the transmission, broadcast, distribution, or 11 dissemination of a service directly or indirectly attributable to the performance in the 12 state of an athlete, entertainer, singer, musician, dancer, comedian, magician, 13 performing artist, actor, actress, or similar person, including syndication fees. 14 (b) A deduction included in taxable income that results from a capital loss, 15 passive activity loss, or net operating loss must be based solely on income or a gain, 16 loss, or deduction derived from or connected with a source in the state. A nonresident 17 individual shall treat a deduction under this subsection in the same manner as the 18 corresponding federal deduction, unless the department requires otherwise in 19 regulation. 20 Sec. 43.22.050. Business conducted by a nonresident individual, trust, or 21 estate; income derived from or connected with a source in the state. (a) The 22 department shall adopt regulations governing the amount of income or the amount of a 23 gain, loss, or deduction from a business conducted by a nonresident individual, trust, 24 or estate that is derived from or connected with a source in the state for purposes of 25 determining taxable income. Regulations adopted under this subsection must be 26 consistent with AS 43.19 (Multistate Tax Compact) and AS 43.22.045 and include 27 adjustments under AS 43.22.030. 28 (b) The department shall adopt regulations governing the amount of income or 29 the amount of a gain, loss, or deduction that is derived from or connected with a 30 source in the state and is included in a nonresident 31 (1) partner's distributive share for purposes of taxation under this
01 chapter; 02 (2) shareholder's pro-rata share of an S corporation for purposes of 03 taxation under this chapter. 04 (c) The department may by regulation require a taxpayer to allocate rather 05 than apportion income or a gain, loss, or deduction under this section. 06 Sec. 43.22.055. Nonresident trust, estate, or beneficiary; income derived 07 from or connected with a source in the state. (a) The department shall adopt 08 regulations governing whether income or a gain, loss, or deduction of a nonresident 09 estate or nonresident trust is included in taxable income derived from or connected 10 with a source in the state. Regulations adopted under this subsection must be 11 consistent with the remainder of this section and AS 43.22.045. 12 (b) A nonresident beneficiary shall include in taxable income derived from or 13 connected with a source in the state a distribution from an estate or trust as if the 14 nonresident beneficiary earned or incurred the income or a gain, loss, or deduction 15 attributable to the distribution directly from the source. For purposes of this 16 subsection, the department may establish one or more methods for a nonresident 17 beneficiary to determine whether income or a gain, loss, or deduction is attributable to 18 a distribution. The department shall consistently apply a method from year to year and 19 apply the same method to other nonresident beneficiaries of the same trust or estate. 20 Nothing in this subsection requires the department to give effect to a provision of an 21 instrument creating an estate or trust if the department reasonably believes that the 22 principal purpose of the provision is to evade the tax imposed under this chapter. 23 Sec. 43.22.060. Part-year resident individual, trust, or estate; residency 24 income; income derived from or connected with a source in the state. (a) Except as 25 otherwise provided in this section, the taxable income of a part-year resident 26 individual, trust, or estate is the sum of 27 (1) the taxable income of the part-year resident individual, trust, or 28 estate during the period of residency; and 29 (2) the taxable income derived from or connected with a source in the 30 state for the period of nonresidency of the individual, trust, or estate. 31 (b) The department shall adopt regulations to determine the taxable income of
01 a part-year resident taxpayer who is granted a statutory stock option, restricted stock, 02 nonstatutory stock option, or a stock appreciation right and who, during the grant 03 period, performs services in the state for, or is employed in the state by, the 04 corporation granting the option, stock, or right. 05 Sec. 43.22.065. Personal service corporations and S corporations formed 06 or used to evade tax. (a) The department may allocate all income, deductions, credits, 07 exclusions, and other allowances between a personal service corporation or S 08 corporation and its employee-owners if the 09 (1) personal service corporation or S corporation performs 10 substantially all of its services for or on behalf of another corporation, partnership, or 11 other entity and the effect is the evasion of the tax under this chapter; and 12 (2) allocation is necessary to reflect the source and amount of the 13 income, regardless of whether the corporation is otherwise taxable. 14 (b) For purposes of this section, evasion of the tax under this chapter occurs 15 when a personal service corporation or S corporation is used to 16 (1) reduce the taxable income of a resident or the taxable income of a 17 nonresident derived from or connected with a source in the state; or 18 (2) secure the benefit of an expense, deduction, credit, exclusion, or 19 other allowance for any employee-owner that would not otherwise apply under this 20 chapter. 21 (c) The constructive ownership of stock rules under 26 U.S.C. 318 (Internal 22 Revenue Code) apply to this section, except that "5 percent" shall be substituted for 23 "50 percent" in 26 U.S.C. 318(a)(2)(C) (Internal Revenue Code). 24 (d) In this section, all persons specified in 26 U.S.C. 267(b) (Internal Revenue 25 Code) shall be treated as one entity. 26 (e) In this section, 27 (1) "employee-owner" means any employee who owns, on any day 28 during the taxable year, more than 10 percent of the outstanding stock of a personal 29 service corporation or S corporation; 30 (2) "personal service corporation" means a corporation whose principal 31 activity is the performance of personal services that are substantially performed by the
01 employee-owners of the corporation. 02 Sec. 43.22.070. Determination of taxable year and method of accounting. 03 (a) For purposes of the tax imposed under this chapter, a taxpayer's 04 (1) taxable year is the same as the taxpayer's taxable year for federal 05 income tax purposes; and 06 (2) method of accounting is the same as the taxpayer's method of 07 accounting for federal income tax purposes. 08 (b) The department shall adopt regulations to determine the taxable income of 09 a taxpayer whose method of accounting changes during a taxable year or between 10 taxable years. 11 Sec. 43.22.075. Returns and payment of taxes. (a) A taxpayer shall file with 12 the department a return setting out 13 (1) the amount of tax due under this chapter; and 14 (2) other information necessary to carry out this chapter, as required by 15 the department in regulation. 16 (b) A person required to file a return under this chapter shall file the return on 17 a form or in a format prescribed by the department. The return is due to the department 18 at the same time and in the same manner, including extensions, as the taxpayer's 19 federal income tax return to the United States Internal Revenue Service. A return filed 20 under this chapter must be made under oath and on penalty of perjury. 21 (c) The total amount of tax imposed by this chapter is due and payable to the 22 department at the same time and in the same manner as the federal individual income 23 tax payable to the United States Internal Revenue Service. 24 (d) A taxpayer, upon request by the department, shall furnish to the 25 department a true and correct copy of a return that the taxpayer has filed with the 26 United States Internal Revenue Service. 27 (e) A taxpayer shall notify the department in writing of an alteration in, or 28 modification of, the taxpayer's federal income tax return and of a recomputation of tax 29 or determination of deficiency, whether with or without assessment. A full statement 30 of the facts must accompany the notice. A taxpayer shall file the notice not later than 31 60 days after the final determination of the alteration, modification, recomputation, or
01 deficiency and shall pay any additional tax due under this chapter at that time. In this 02 subsection, "final determination" means the time that an amended federal return is 03 filed, a notice of deficiency or an assessment is mailed to the taxpayer by the Internal 04 Revenue Service, and the taxpayer has exhausted rights of appeal under federal law. 05 (f) The department may credit or refund overpayments of taxes, taxes 06 erroneously or illegally assessed or collected, penalties collected without authority, 07 and taxes that are found unjustly assessed or excessive in amount, or otherwise 08 wrongfully collected. The department shall, in regulation, set limitations, specify the 09 manner in which claims for credits or refunds are made, and give notice of allowance 10 or disallowance. When a refund is allowed to a taxpayer, the refund may be paid out 11 of the general fund on a warrant issued under a voucher approved by the department. 12 (g) A partnership, S corporation, estate, or trust shall provide to its partners, 13 beneficiaries, or shareholders, and to the department, all information necessary for its 14 partners, beneficiaries, and shareholders to comply with this chapter. 15 (h) An individual is not required to file a return under this section 16 electronically, but a person employed to prepare and file a tax return under this section 17 for an individual shall file the return for that individual electronically. 18 (i) The department shall adopt regulations that set out requirements for a 19 spouse, upon request, to be partially or fully relieved from joint and several liability 20 resulting from the joint filing of a tax return. 21 Sec. 43.22.080. Tax withholding on wages of individuals. (a) Every 22 employer making payment of wages or salaries 23 (1) shall, except as provided in (c) of this section, deduct and withhold 24 an amount of tax computed in a manner to approximate the amount of tax due on those 25 wages and salaries under this chapter for that taxable year; 26 (2) shall remit the tax withheld to the department accompanied by a 27 return on a form prescribed by the department at the times required by the department 28 by regulation; 29 (3) is liable for the payment of the tax required to be deducted and 30 withheld under this section but is not liable to any individual for the amount of the 31 payment; and
01 (4) shall furnish to an employee on or before January 31 of the 02 succeeding year, or within 30 days after a request by the employee after an employee's 03 or individual's termination if the 30-day period ends before January 31, a written 04 statement on a form prescribed by the department showing 05 (A) the name and taxpayer identification number of the 06 employer; 07 (B) the name and social security number of the employee; 08 (C) the total amount of wages and salary for the taxable year; 09 and 10 (D) the total amount deducted and withheld as tax under this 11 chapter for the taxable year. 12 (b) The department shall publish the rate of withholding required by this 13 section. 14 (c) An employer shall deduct and withhold the tax due under AS 43.22.010(d) 15 from an employee's wages subject to withholding from the first regular payroll of the 16 calendar year. If the employee's first payroll is insufficient to cover the estimated tax 17 due, the employer shall continue to deduct and withhold from subsequent payrolls 18 until the tax due under this subsection is fully withheld. A self-employed individual 19 shall remit to the department the tax due under this subsection in accordance with 20 regulations adopted by the department. 21 Sec. 43.22.085. Withholding on nonresident partners; composite returns. 22 (a) Unless otherwise provided by this section, a partnership that is required to file an 23 annual information return under subchapter K of the Internal Revenue Code (26 24 U.S.C. 701 - 761) shall file a partnership return as prescribed by the department and 25 shall report any income, gains, losses, or deductions that are derived from or 26 connected with a source in the state, as determined under this chapter. 27 (b) A partnership that is required to file a return under (a) of this section shall 28 withhold tax from a nonresident partner's distributive share of the partnership's income 29 or a gain, loss, or deduction derived from or connected with a source in the state at the 30 highest marginal tax rate applicable under this chapter to individuals for the taxable 31 year.
01 (c) Withholding under this section is not required by a partnership that 02 (1) is a publicly traded partnership, as defined in 26 U.S.C. 7704(b) 03 (Internal Revenue Code); and 04 (2) files with the department an annual information return reporting the 05 name, address, taxpayer identification number, and other information requested by the 06 department concerning each unitholder whose distributive share of partnership 07 income, regardless of source, is more than $1,000. 08 (d) The department shall adopt regulations that allow a partnership subject to 09 withholding under this section to file a composite return. 10 Sec. 43.22.090. Permanent fund tax payment. The department shall adopt 11 regulations establishing procedures for an individual eligible for a dividend under 12 AS 43.23.005 to direct the department to hold all or a part of the amount of the 13 dividend to pay the tax due under this chapter. The amount held under this section 14 may not exceed the dividend amount after contributions, garnishments, levies, fees, 15 attachments, assignments, or other reductions or donations allowed under AS 43.23. 16 The department shall apply the amount held under this section to tax owed in the 17 taxable year in which the taxpayer applies for the dividend. The department shall 18 refund the amount of the dividend not applied against taxes under this section to the 19 individual who appears on the application for the dividend. 20 Sec. 43.22.095. Administration. (a) The department shall adopt necessary 21 regulations and forms to implement and interpret this chapter, including regulations 22 and forms for the electronic filing and payment of tax due under this chapter. Federal 23 regulations issued under the Internal Revenue Code shall be considered persuasive 24 authority in interpreting any provision of the Internal Revenue Code on which the tax 25 imposed by this chapter relies, whether or not a federal regulation has been 26 specifically incorporated into a department regulation, unless the federal regulation 27 (1) conflicts with a provision of this chapter; 28 (2) conflicts with a regulation adopted by the department; or 29 (3) is inconsistent with the purposes of this chapter. 30 (b) A transaction or payment between related persons must have economic 31 substance, must serve a bona fide business purpose, and must not have occurred for
01 the primary purpose of lowering the tax due under this chapter. The department, after 02 review or audit of a taxpayer's return, may determine whether there is sufficient 03 documentation or whether a transaction or payment meets the requirements of this 04 subsection. If the department determines that the documentation, transaction, or 05 payment fails to meet the requirements of this subsection, the department may adjust 06 the amount of a payment or transaction, disregard the payment or transaction, or make 07 another adjustment necessary for determining the tax under this chapter. If a payment 08 in an amount greater than $500,000 is made or required to be made from one person to 09 a related person, the related persons shall submit documentation substantiating that the 10 amount of the payment is consistent with 26 U.S.C. 482 (Internal Revenue Code). 11 Payments subject to this subsection include payments for interest, royalties, 12 management fees, services, inventory, tangible personal property, intangible property, 13 and real property. 14 (c) A tax deficiency assessed by the department under this section is assumed 15 to be correct. A taxpayer has the burden of proving that the tax deficiency is 16 erroneous. 17 (d) The department shall adjust the amount of the exemption under 18 AS 43.22.030(b) annually for inflation. Adjustments must be consistent with inflation 19 adjustments made by the Internal Revenue Service to the federal individual income tax 20 standard deduction. The department shall round amounts under this subsection to the 21 nearest $100 and publish the adjusted amounts. 22 (e) The tax collected by the department under this chapter shall be deposited 23 into the general fund and accounted for separately. 24 Sec. 43.22.100. References to Internal Revenue Code. (a) Sections 26 U.S.C. 25 6654, 6662, 6664, 6694, 6695, 6700 - 6702, 6707, 6713, 7201, 7202, 7206, 7207, 26 7216, 7407, and 7408 (Internal Revenue Code), as those sections read on January 1, 27 2023, are incorporated by reference as a part of this chapter and, if conflicting, 28 supersede provisions in AS 43.05 and AS 43.10. 29 (b) When provisions of the Internal Revenue Code incorporated by reference 30 under (a) of this section refer to rules and regulations adopted by the United States 31 Commissioner of Internal Revenue, they are regarded as regulations adopted by the
01 department under this chapter, unless the department adopts specific regulations in 02 their place. 03 Sec. 43.22.105. Information released to a banking institution. 04 Notwithstanding AS 43.05.230, information on an individual tax return filed under 05 this chapter may be released to a banking institution to verify the direct deposit of a 06 tax refund or correct an error in that deposit. 07 Sec. 43.22.110. Early education fund. (a) The early education fund is 08 established in the state treasury. The department shall separately account for the tax 09 collected under this chapter and deposit it into the early education fund. 10 (b) The legislature may use the annual estimated balance in the fund to make 11 appropriations for kindergarten through grade 12 education and early learning 12 programs, including the parents as teachers program established under AS 14.03.420. 13 (c) Nothing in this section creates a dedicated fund. 14 Sec. 43.22.150. Definitions. In this chapter, 15 (1) "domicile" means an individual's true, fixed, principal, and 16 permanent home, to which the individual intends to return even if currently living 17 elsewhere; if an individual has two or more homes, "domicile" means the home that 18 the individual regards and uses as the individual's more permanent home; once 19 established, a domicile remains the individual's domicile until the individual 20 demonstrates a real change of intent and moves to a new domicile; indications of 21 domicile include the 22 (A) location of the place of employment of the individual; 23 (B) location of real property owned by the individual; 24 (C) registration and physical location of motor vehicles, planes, 25 boats, and snow machines owned by the individual; 26 (D) location of a bank account or active checking account of 27 the individual; 28 (E) address where the individual receives mail; 29 (F) location of a school where the individual or a member of 30 the individual's immediate family 31 (i) attends; or
01 (ii) receives resident tuition; 02 (G) location of an organization of which the individual is a 03 member; 04 (H) location of a parent, child, grandchild, or great-grandchild; 05 (I) location of dental and medical personnel that provide 06 services to the individual on a regular or consistent basis; 07 (J) filing of a prior year tax return by the individual as a 08 resident or nonresident; 09 (K) location where an individual is registered to vote; 10 (L) location where an individual holds a resident fishing, 11 hunting, or trapping license; 12 (2) "employee" has the meaning given in 26 U.S.C. 3401; 13 (3) "employer" has the meaning given in 26 U.S.C. 3401; 14 (4) "federal adjusted gross income" has the meaning given to "adjusted 15 gross income" in 26 U.S.C. 62; 16 (5) "fiduciary" means a guardian, trustee, executor, administrator, 17 receiver, or conservator or a person, whether individual or corporate, acting in a 18 similar position of special confidence toward another; 19 (6) "head of household" means a single taxpayer, or married taxpayer 20 where both spouses file separate returns, with a qualified dependent living in the same 21 home for more than half the taxable year; 22 (7) "Internal Revenue Code" means the Internal Revenue Code (26 23 U.S.C. 1 et seq.), as amended; 24 (8) "irrevocable trust" means a trust or portion of a trust that is not 25 subject to a power to revest title in a person whose property constitutes the trust or a 26 portion of the trust; 27 (9) "nonresident estate" means an estate other than a resident estate or 28 part-year resident estate; 29 (10) "nonresident individual" means an individual who is not a resident 30 of the state for any portion of the taxable year; 31 (11) "nonresident trust" means a trust other than a resident trust or
01 part-year resident trust; 02 (12) "partner" means a partner as defined in 26 U.S.C. 7701(a) 03 (Internal Revenue Code) and includes a member of a limited liability company or 04 similar entity that is treated as a partnership for federal income tax purposes; 05 (13) "partnership" means an entity as defined in 26 U.S.C. 7701(a) 06 (Internal Revenue Code) and includes a limited liability company and a similar entity 07 treated as a partnership for federal income tax purposes; 08 (14) "part-year resident estate" means an estate that is a resident of the 09 state for a portion of but not the entire taxable year; 10 (15) "part-year resident individual" means an individual who is a 11 resident of the state for a portion of but not the entire taxable year; 12 (16) "part-year resident trust" means a trust that is a resident of the 13 state for a portion of but not the entire taxable year; 14 (17) "related person" means a person that satisfies the definition of 15 "related persons" in 26 U.S.C. 144 or 147 or a person in a relationship as described in 16 26 U.S.C. 267(b) (Internal Revenue Code); 17 (18) "resident estate" means the estate of a 18 (A) decedent who at the time of death was a resident of the 19 state, regardless of the residence of the fiduciary or beneficiary, if the 20 disposition or administration of the estate is subject to state law; or 21 (B) person who, at the time of commencement of a bankruptcy 22 proceeding under Title 11 of the United States Code, was a resident of the 23 state; 24 (19) "resident individual" means an individual who 25 (A) receives a permanent fund dividend under AS 43.23.005; 26 (B) receives a tax benefit available only to an individual 27 domiciled in the state; or 28 (C) is domiciled in the state for the entire taxable year unless 29 the individual maintains a permanent place of abode outside the state and 30 spends, in the aggregate, not more than 30 days during the taxable year in the 31 state;
01 (20) "resident trust" means a trust or a portion of a trust consisting of 02 property 03 (A) transferred by will of a decedent who at the time of death 04 was a resident of the state if the disposition or administration of the property is 05 subject to state law; or 06 (B) of a person who was a resident at the time the property was 07 transferred to the trust if, at the time of the transfer, the trust was 08 (i) an irrevocable trust; 09 (ii) a revocable trust and the trust has not become 10 irrevocable; or 11 (iii) a revocable trust and the trust later became 12 irrevocable at a time the person transferring property to the trust was a 13 resident; 14 (21) "revocable trust" means a trust or portion of a trust that is subject 15 to a power, exercisable immediately or at a future time, to revest title in a person 16 whose property constitutes the trust or portion of the trust; 17 (22) "S corporation" means a corporation that has elected to file a 18 federal income tax return under 26 U.S.C. 1361 - 1379 (Internal Revenue Code); 19 (23) "taxable income" means income taxable under this chapter; 20 (24) "taxable year" means the calendar year or a fiscal year ending 21 during the calendar year; 22 (25) "taxpayer" means a person subject to a tax imposed by this 23 chapter; 24 (26) "wages" has the meaning given in 26 U.S.C. 3401. 25 * Sec. 3. AS 43.23 is amended by adding a new section to read: 26 Sec. 43.23.092. Permanent fund dividend individual tax payment. In 27 accordance with AS 43.22.090, the department shall prepare the Alaska permanent 28 fund dividend application to allow an applicant to direct the department to hold all or 29 part of the amount of the individual's permanent fund dividend for application against 30 the tax imposed under AS 43.22. 31 * Sec. 4. AS 43.05.085; AS 43.20.012(b), and 43.20.013 are repealed January 1, 2026.
01 * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 02 read: 03 APPLICABILITY. AS 43.22, added by sec. 2 of this Act, applies to income received 04 on or after the effective date of sec. 2 of this Act. 05 * Sec. 6. This Act takes effect January 1, 2026.